First published in the Daily Maverick 168 weekly newspaper.

The madcap but intensely loyal general has no hard evidence of this threat, only the supposed knowledge that the enemy has a nuclear bomb, which darkens his entire perspective. Based on this fear, he is prepared to launch a preemptive attack and risk activating the Soviet Union’s doomsday machine, equally destructive bombs set to go off in the US the moment it launches its own nuclear devices – ensuring mutual annihilation.

Debt, you could say, is the modern nuclear bomb. The theory is too much of it could blow up the world economy. Opposition political parties, rooms and rooms away from the nuclear debt codes, campaign on eliminating debt or at least managing it down to two or three landmines propelled into the distant future like a one-player game of cosmic frisbee.

Incumbent governments, having sat in the War Room, necessarily offer a more sophisticated sophistry: the debt bomb can be deactivated piece by piece, carefully stripped into smaller and smaller bombs scattered across the timeline in non-threatening increments, and paired with a narrative of non-proliferation regularly streamed to investor-citizens to coddle them into not pulling the plug and recalling their funds.    

South Africa faced just such a nuclear sovereign debt crisis in the late 1980s, as international banks and investors refused to roll over the  loans owed to it by the apartheid government. Between 1980 and 1984, South Africa’s total debt increased from around $17-billion to more than $24.3-billion, almost doubling from 20% of GDP to 46%. Most of the debt was owed to external lenders, in the US and some European countries.

The series of states of emergency and the growing violence against the majority of the population agitating for democratic rule unnerved investors and they demanded payment, about $10-billion. The South African government retaliated, sort of, declaring a moratorium on all short-term debt.

Assured mutual destruction – investors risked losing their money and the state was cut off from all future funding unless it agreed to the political reforms that ultimately led to the democratic elections in 1994.

The apartheid government’s doomsday machine failed to materialise, and so it was destroyed. The incoming ANC government, however, could not just write off the debt, and so the game of chicken began again. Government negotiated repayment terms, and having seen up close the politically fatal consequences of debt, implicitly committed to a conservative fiscal regime aimed at achieving a budget surplus and keeping a lid on spending despite an intense need to spend more on welfare programmes to make up for close on a century of economic segregation.

The scars, the post-traumatic stress of that debt scare, run deep, and are almost the defining genetic feature of SA’s economic management and attitude towards debt. A big fear of our financial czars is how much debt we can take on before it all blows up.

The yield curve or spread, a line measuring the gap between short- and long-term interest rates, is to a degree the physical form of that existential fear. The spread, or difference between benchmark bond rates in the US and what South Africa pays in interest on its long-term debt, almost acts like a weekly horoscope for the finance minister. The wider the spread the bleaker the future.

By 2020, South Africa’s cost of borrowing was as high as it was in the 1980s. Public debt, which was around 20% of GDP in the mid-2000s, is now on track to hit 90%. It is no surprise then, that this period coincides with the country’s most austere budgets yet and repeated warnings of a debt crisis.  

When SA imposed its own fiscal structural adjustment programme in the late 1990s, a generous interpretation of the strategy was that the country was preparing to unleash a progressive regime, laying the ground for a huge quantum of borrowing needed to finance the policies to mend a broken society.

It sounds like a plausible tactic: lowering the cost of borrowing by pushing down the yield spread before whipping out the borrowing bowl.

It is not unlike applying for a home loan. Before going to the bank, you want to clear your credit card. Pay off the Edgars account. Remedy the defaults on the car insurance premiums. Hell, you may even want to settle your TV licence. Start on a cleanish slate, and get the lowest interest rate possible.

It seems as if the government, and the country by extension, is stuck between pursuing this sow-now-reap-later strategy, or going full General Jack D Ripper (Kubrick’s titular protagonist) and viewing debt as a life-or-death doomsday scenario.

The former depends on a large degree of trust between the government and the people who must postpone their hopes of prosperity. The latter, well, at the end of the film, General Ripper shoots himself and dies with the nuclear codes that could have prevented the bombs from going off. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.